Square's (SQ) Q1 Earnings & Revenues Beat Estimates, Up Y/Y
Zacks Investment Research | May 01, 2019 09:44PM ET
Square Inc. (NYSE:SQ) delivered first-quarter 2019 adjusted earnings of 11 cents per share, which beat the Zacks Consensus Estimate by 3 cents and was also higher than management’s guided range of 6-8 cents per share. The figure also soared 83.4% on a year-over-year basis but fell 21.4% on a sequential basis.
Net revenues of $959.36 million surpassed the Zacks Consensus Estimate of $942.62 million and also came ahead of the guided range of $918 million to $938 million. The figure increased 43.5% from the year-ago quarter and 2.9% sequentially.
Per the company, adjusted revenues came in $489.05 million, up 59.4% year over year and 5.3% from the previous quarter. The figure also comfortably outpaced management’s revised guided range of $472-$482 million.
The top line was driven by robust contributions from Weebly and Zesty buyouts, and growing adoption of Cash App. Further, continued acceleration in gross payment volume (GPV) of the company drove the results.
Notably, shares of the company dropped 6.07% in the after-hours trade on May 1 following the lower-than-estimated GPV in the reported quarter and weaker-than-expected second-quarter 2019 earnings guidance.
Nevertheless, its robust product portfolio and strengthening seller contribution are expected to aid business growth in the near term.
Coming to the price performance, shares of Square have returned 51.3% over a year, outperforming the Square, Inc. Quote
Operating Details
Per the company’s report, gross profit as a percentage of net revenues came in 41.4%, expanding 320 bps year over year.
Adjusted EBITDA as a percentage of adjusted revenues was 12.6%, expanding 90 bps year over year.
Operating expenses came in $418.8 million, surging 51.6% from prior-year quarter. Adjusted operating expenses were $339.7 million, up 53.8% year over year.
Product development expenses were $153.6 million, up 46% year over year, primarily owing to growing engineering, data science and design personnel costs. Further, cost related to Weebly acquisition led to increase in these expenses.
General and administrative expenses were $101.6 million, up 35% from prior-year quarter. This was primarily owing to finance, legal and support personnel costs.
Further, sales and marketing costs were $133.7 million, up 73% year over year, due to increase in Cash App peer-to-peer payment transfer, advertising and personnel costs.
Balance Sheet
As of Mar 31, 2019, cash and cash equivalents balance was $521.7 million, down from $583.2 million as of Dec 31, 2018. Short-term investments were $566.5 million in the reported quarter, up from $540.9 million in the previous quarter.
Long-term debt was $909.3 million, increasing slightly from $899.7 million in previous quarter.
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Guidance
For second-quarter 2019, Square expects net revenues between $1.09 billion and $1.11 billion. The Zacks Consensus Estimate for revenues is pegged at $1.10 billion.
Further, adjusted revenues are anticipated in the range of $545-$555 million. Adjusted EBITDA is expected in the band of $90-$94 million.
Adjusted earnings are expected in the range of 14-16 cents per share. The Zacks Consensus Estimate for earnings is pegged at 18 cents per share.
For 2019, Square raised the guided range for total revenues from $4.35-$4.41 billion to $4.41-4.47 billion. The Zacks Consensus Estimate for net revenues is currently pegged at $4.43 billion.
Further, the guided range for adjusted revenues also got revised upward from $2.22-$2.25 billion to $2.25-$2.28 billion. Adjusted EBITDA is anticipated in the range of $405-$415 million.
Adjusted earnings are projected in the range of 74-78 cents per share. The Zacks Consensus Estimate for earnings is currently pegged at 73 cents per share.
Zacks Rank and Stocks to Consider
Currently, Square carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are ACI Worldwide, Inc. (NASDAQ:ACIW) , Avid Technology, Inc. (NASDAQ:AVID) and Agilent Technologies, Inc. (NYSE:A) . While ACI Worldwide and Avid Technology currently sport a Zacks Rank #1 (Strong Buy), Agilent Technologies carries a Zacks Rank #2 (Buy). You can see Zacks Investment Research
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